Neef accounts run dry after under-collection

National Economic Empowerment Fund Limited (Neef) has temporarily stopped disbursing loans due to lack of funds after under-collecting from beneficiaries, it has emerged.

Updating the Parliamentary Committee on Trade, Industry and Tourism yesterday on the status of Neef loans, chief executive officer Humphrey Mdyetseni said they expected to recover K31.5 billion from beneficiaries by now, but they collected only K19.5 billion.

He said K15 billion of the collection has already been disbursed and the balance used for other operations.

Mdyetseni said the recover y rate of 63 percent is not impressive considering there is high demand for the loans.

He said : ” As it stands today, we have seriously slowed down disbursement of loans owing to the status of our collection. We do not want to create a crisis where we include so many people and end up with fewer collections to service the loans.”

According to Mdyetseni, Neef asked government to allocate K20 billion to the fund in the current financial year, but they only got K7 billion.

He has since asked Parliament to help Neef get a K10 billion allocation in the mid-year budget review if it is to continue with disbursements.

Neef targeted to disburse K60 billion to about 200 000 people between February 2021 and March 2023. As of October 14 2022, Neef had disbursed K47.3 billion to 125 008 people.

The 63 percent recovery rate is lower than the minimum 80 percent rate that the Reserve Bank of Malawi recommended to Neef. It is, however, higher than the previous 21 percent recovery rate.

Mdyetseni said Neef is moving to intensify recovery of the loans by, among others, intensifying client tracing and transfer to curb defaulting of the loans having observed that some beneficiaries relocate to other places after getting loans in order to default.

In his remarks, Parliamentary Committee on Trade, Industry and Tourism chairperson Simplex Chithyola Banda called on Neef to aim for 80 percent recovery rate and get tough on loan defaulters.

“You need to confiscate property from loan defaulters. Whether it is a goat, go and confiscate. This fund is a revolving fund, defaulting should not be entertained,” he said.

Banda agreed that considering the high demand for the loans, it is only right that more resources should be allocated to Neef.

Government committed to pump K75 billion in Neef by 2024 which will have supported 300 000 people, thereby also creating thousands of jobs.

Neef has already covered over half of the target. In the period between 2005 to 2020, about K20 billion was allocated to the institution which used to be called Malawi Enterprise Development Fund and before that Malawi Rural Development Fund.

The loans, with an interest rate of 2 percent per month, range from K250 000 to K250 million, an improvement from the past when they ranged from K50 000 to K75 million with an interest of 4 percent per month.

The age brackett for beneficiaries has also been revised. The loans now benefit people aged between 18 years and 75 years, while in the past it covered the ages between 18 years and 60 years.

Of the 125 008 that have benefited in the Neef loans, 58 484 are youth, 52 255 women and 14 269 men.